When you take all of the events occurring right now, both on the financial front and the social front globally, one can easily get the sense you are watching a slow motion implosion of societal structures. The question becomes how to react to the events. On the one hand, do you get involved, act, react, prepare, declare, etc. or do you just observe and stay detached. I think anyone who is awake is asking these types of questions at the moment.
From a financial perspective, the situation in Europe I fear is going to spread like wildfire in the next few months. There are many reasons for this, but mostly it is that those who “know” the truth have not been truthful with the general public. Their reasoning for this is that they don’t want to precipitate a general panic, but the truth is they are trying to save their butts from an angry mob.
The events, however, are overwhelming them and the next few weeks these events are going to spiral out of control. What events you ask? consider these most recent revelations.
Greece will need financial assistance amounting to between €100-120bn over the next three years, German parliamentarians claimed on Wednesday after meeting Dominique Strauss-Kahn, managing director of the International Monetary Fund, and Jean-Claude Trichet, president of the European Central Bank. They said that the €45bn currently proposed as a rescue package of loans from the IMF and other members of the eurozone was only enough for the first year of support. Yields on two-year Greek bonds rose to above 16 per cent on Wednesday amid growing nervousness about the state of the country’s deteriorating public finances.
When you consider these kinds of numbers, the reality dictates these are not doable in any fashion. Greece could not devise draconian enough austerity plans to address this kind of debt and the supporting eurozone could not possibly support such an effort. I say this because Greece is not an isolated case given the situations which are similar in Spain, Portugal, Italy and for that matter the UK as well. “It’s not a question of the danger of contagion; contagion has already happened,” Angel Gurría told Bloomberg. “This is like Ebola. When you realise you have it you have to cut your leg off in order to survive.”
Credit rating agencies have been criticized for their role in the financial crisis, but their views are still closely watched by investors anxious about the deteriorating public finances of some of the world’s most heavily indebted countries. S&P’s announcement hit Spain’s stocks and bonds. Spanish 10-year bond yields, which have an inverse relationship with prices, rose to 4.127 per cent, while the stock market tumbled 3 per cent. Greek bond prices fell further in the wake of Tuesday’s downgrade of Greece’s credit rating to junk status by S&P. Ten-year bond yields jumped to 9.91 per cent. The euro was down 0.1 per cent at $1.3135, its lowest since April 2009.
In the UK, the political candidates are debating and without exception they are lying to the public as to the extent and nature of UK national debt. At best they are representing the issue at 25% of reality. They cannot bring themselves to even utter the truth about what austerity measures will be required for fear of evoking Greek like riots in Britain. The truth is they know that in this case the truth would not set them free but exactly the opposite, it would land them in jail or worse on the pointy end of a pitchfork.
Social unrest combined with these financial realities is beginning to spread world-wide as well. These issues tend to simmer for a period and then rapidly come to a boil. We are seeing just this in Thailand, the Ukraine, Greece and now I fear the US. Politicians and talking heads tend to fuel the fires for their own selfish purposes which does not help the situation.
The immigration issues in the US are a prime example of how irresponsible political leaders are acting for what they perceive as political positioning. Arizona’s politicians managed to guide frustrations into an absurd legislative action that can only bring riots and bloodshed. At the core of the issue when examined with the cool head is how NAFTA and the impacts of NAFTA were not planned for and dealt with as they unfolded. NAFTA created a situation in Arizona where agricultural products from Arizona were allowed to be imported into Mexico cheaper than Mexicans could produce the products and import them into the US. These activities have increased by over 30% in the last three years. http://www.nass.usda.gov/Statistics_by_State/Arizona/Publications/Crops/cur-crop.pdf. Over 2,000,000 small farmers in Mexico were displaced by these facts. However, Arizona imported those farmers to work the fields in Arizona to deal with the rapid increase in cheap labor demand. Now the social issues are coming home to roost. We see this spilling over into other states like Texas, California, and New Mexico.
Instead of politicians dealing with these facts and the cause and effect elements of the problem, they choose instead to fuel the emotional aspects of the issues for political gain. They are however, creating a maelstrom of events like is very likely to spiral out of control. What we need right now is calm honest debate of the cause and effects of the situation on the border. We need an honest assessment of all of the factors that have created the tension and most of all we need to deal with issues as partners, not enemies. There is enough stress and frustation on both sides of the border. The apartheid approach simply will not work.
Globally putting all these things together as a giant tapestry, we certainly look like we are heading into the Summer of Hell. Maybe we ought not take ourselves so seriously. Maybe we ought to look at the messes we are in and chuckle at how ignorant we can be, and then sit down and figure our way out of this mess. That is the one thing I think is gravely missing here. It is our sense of humor and a good belly laugh. I can hope.
Here’s Uncle Willy’s Thought for the Day: